The prevailing business paradigm today is that a company only exists to maximize shareholder value. Any company or anyone who believes this to be true is in big trouble if they have this mindset operating within their organizations today. Not only is there really nothing else in business or life that can be successfully measured by only one metric, but the sole purpose of any organization needs to be "bigger" than just making money! Of course a company has to bring in more revenue than it spends, but only focusing on making money is a guaranteed way to drive your company out of business and quickly.
"My company exists to maximize shareholder value. Our company sole focus is to be number 1 in the world. Our company continuously strives to be the best!" If your company's growth strategy is aligned based on anyone of the above statements your organization is set up to fail. And yet way too many Fortune 500 companies have these types of statements as their corporate vision and mission.
For example, Facebook was not created to make shareholders wealthy- but rather to provide an on-line method for people to connect and communicate. Starbucks wasn't founded to employ thousands of people (which is a great benefit) but rather to provide a place for people to come together and commune. The sole purpose a company exists should be reflected in the company's vision. Microsoft founder Bill Gates had a vision of having a computer on every desk around the world- which at the time of main-frame computers was a revolutionary idea. In other words, the sole purpose Microsoft was created was to allow people to access information at their fingertips.
A company should exist to provide a product or service (which is what the mission is based on) to ultimately provide a benefit for society. There has to be a tangible benefit (which adds value for the customer) for the company to exist and maximizing shareholder value doesn't qualify. Ironically maximizing shareholder value (for both private and public companies) needs to be the goal and the corporate strategy needs to outline how the company will accomplish all of their goals while aligned around their sole purpose. Your company may provide the most in-demand product or service, but if you don't manage your organization profitably then it will simply cease to exist over time. So, maximizing value for your company is the most important outcome, but it depends on a myriad of other components to realize a profit. In order to realize your outcome you have to have your company aligned to achieve that desired result. Simply stated the four key organizational concepts are:
Vision (statement) - is why your company exists
Mission (statement) - is what product and/or service your organization provides.
Strategy - is the plan which will be executed to accomplish the goals.
Goals- are the specified results from all initiatives.
A recent advertisement for a large bank stated "XYZ bank treats every customer like our biggest customer. You're a big deal." So what is wrong with that very enticing idea? Who doesn't want to be the biggest? The most important? The problem is in how you define the biggest. Is it the customer that has the most money on deposit? Is it the customer that borrows the most? It is the customer that uses the most bank services? And makes the most money for the bank? The answer is you as their customer should want to be treated as their "most valuable" customer regardless of your financial status and then it is up to you and the bank to define what value means to you.
In order to be successful and provide shareholder value, a company must focus on providing value to their customers first and foremost. Of course you have to make sure every aspect of your organization is focused on delivering value and that your strategies are based on a well-executed plan and all of your employees are "on board" and engaged. To keep your organization on-track and growing, make sure you have clearly defined your company's purpose, vision, mission and strategy and then lead and manage your company to success!
As business advisors, Center Consulting Group specializes in working with businesses and organizations focused on improving their business practices. Proven results include increasing profits, reducing employee turnover, increasing client retention, and improving quality and productivity through strategic initiatives. Services offered: consulting, training, seminars, and keynote speeches.
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